By: James Noble - Executive Wholesale, Retail & Franchise Sector, Absa Business Banking will

Ahead of the Franchise Association of South Africa’s 2026 National Conference and Expo, James Noble, Sector Executive: Wholesale, Retail and Franchising at Absa Business Banking, underlines the importance of growing this sector to the economy of South Africa and the wider continent.

If franchise business owners want to scale up and stay ahead of the pack in their retail areas, they must embrace new technology and innovation, or risk being overtaken as the modes of doing business change globally and AI emerges as a critical tool to succeed.

While the franchise business sector already contributes R1 trillion to the South African economy, there’s optimism for even further growth. Those who succeed will be adaptable, open to data-driven decisions and willing to tailor their business towards a better user experience in an ever-changing trading environment. Being able to contribute towards reconfiguring established best practice when needed – often at a dizzying speed – will be a key driver of maintaining competitiveness, helping brands illustrate their resourcefulness and demonstrating they will not be left behind. A good example of this was during the Covid-19 pandemic when South Africa saw which retailers were quick off the mark to mobilise their same day grocery and retail home deliveries. It was abundantly clear which retailers dithered and were left behind. The early adapters improved their models and are still ahead of the pack. Those who came late to the party may have difficulty catching up.

It’s inevitable that AI capability will play a far more significant role in driving successful business going forward. Smart business owners know that loyalty programmes steer customer behaviour. To this end, AI is already starting to identify specific customer needs and spending patterns, and tailoring discount vouchers and loyalty points based on what these customers normally purchase. Using predictive demand capabilities, AI will streamline business by analysing past data to predict future orders, for example. Another way AI will contribute will be in solving the often-lengthy times taken for fast food deliveries, a big crunch point for many businesses.

Again, the innovators will be the ones that corner the market in their fields. For instance, we are already seeing the rise of dark kitchens here, where many fast-food outlets are clustered together in an unbranded location under an umbrella shell, so that home deliveries can reach customers faster and smarter. It’s a brilliant solution concept which works well. No one wants a cold takeout, delivered late because the outlet is all the way across town. 

Self-service and high-tech cashier-less checkouts also have the potential to fly, but this will be limited to those who can afford this expensive technology.

While the notion exists that AI will deprive people of jobs, this could be balanced by more franchises being established. The FASA 2023 Franchise Survey, sponsored by Absa, indicates that within the sector, each new franchise business brings the potential of eight to 10 new jobs. Crucially, for every 14 direct jobs, seven indirect jobs are created in supply chains and support services. Many of these represent material prospects for economic empowerment for women, youth, black owned business and emerging markets in townships and rural communities.

Having supported South Africa’s franchise industry for more than three decades, Absa has developed a deep understanding of the evolving needs of both franchisors and franchisees. Its sector expertise connects with franchise businesses throughout their lifecycle – from new entrants to established brands looking to scale. Insights suggest as the mobile economy and models of financial inclusion expand in Africa, there’s greater scope for those who have been previously sidelined to participate in the market. For instance, there are more women as primary owners of the business as franchising creates new opportunities for them. In addition, women are coming forward to head up the franchisee councils within brands, so they’re at the forefront of representing the interests and concerns of franchisees. 

The FASA data reflects growing confidence for penetration into underserved markets. Predictably, Gauteng still has the largest amount of franchise outlets at 41%, with 16% in the Western Cape, 12% in KwaZulu-Natal, and the other provinces with a combined 31%.

The data FASA has mined reveals that as of 2023 there were 68,463 franchisees operating across 727 franchise systems. There was a healthy 43% increase in franchisees operating franchise systems since 2019. Approximately half a million direct jobs were created, representing 4.7% of national employment.

It’s encouraging that according to FASA, 89% of franchisees achieve break even within the first year, up from 69% in 2019. That’s firm testimony to the positive business prospects franchising offers right now.

Franchise ownership by the previously disadvantaged increased from 20% in 2019 to 48% in 2023. South Africa can boast that some 88% of franchise systems are locally owned brands. Almost 40% of South African franchise brands have demonstrated their global competitiveness by operating outside South Africa. Their growth into Africa to markets like Botswana, Lesotho, eSwatini, Namibia, Mauritius has helped create employment opportunities outside our borders, with 13% expanding their reaches into the Middle East, United States, and United Kingdom.

The franchise sector has demonstrated a dogged resilience, weathering some tough economic challenges while maintaining its 15% contribution to GDP over the last couple of years.  Encouragingly, that 15% is growing, reflecting the power of collaboration between franchisors and franchisees, the strength of proven business models, and the effectiveness of knowledge transfer.

The longevity and sustainability of businesses in the franchise sector are also far greater than that of independent businesses. A solid illustration of that is that 80% of franchise businesses are successful beyond three years, whereas 80% of independent SMEs have failed in this period.

As at the start of 2026, the environment for South African SMEs has improved, driven by the lowest fuel costs in several years, more than 270 days without load shedding, the Rand trading at much stronger levels to the dollar, and interest rates dropping to their lowest since 2024. If these trends continue, and franchise owners harness the best new technology they can afford, the broad success of franchises in this decade – and their contribution to the national economy – should be assured.